METRO MATTERS

METRO MATTERS; Ghost of '75 Dogs A Wary Dinkins In Fiscal Struggle

By SAM ROBERTS

Published: April 22, 1991

John E. Zuccotti vividly recalls telephoning the White House on the night of Oct. 16, 1975. The incoming First Deputy Mayor was calling to inform President Gerald R. Ford that New York City would run out of money in the morning. Mr. Zuccotti was told that the President was already asleep.

But at Gracie Mansion that night, city officials and their financial advisers were rudely, if belatedly, roused into grappling with the apparent denouement of a lingering crisis. While they scraped together enough cash to avert an immediate default, a contingency committee convened to ponder a fundamental question: Whom should the city pay first if it runs short of money?

The surprising consensus: water-supply workers and bridge tenders (since Federal law required that drawbridges be left raised if they are unattended). Also, police, fire and sanitation employees and hospital workers and suppliers. Teachers were a low priority, since classes would probably be suspended.

A last-minute investment of teachers' union pension funds made the doomsday planning moot. But it marked a defining moment. It prompted the city to review its priorities and, at least hypothetically, to acknowledge its limits and adjust its agenda.

Today New York City and State face a combined deficit of about $10 billion through July 1992. But City Hall, as in early 1975, has again been diverted by inconsistency and chronic drift, by finger-pointing and by suspicions about the motives of a Governor unable to balance his own budget and further frustrated with a Mayor whose administration seemed at times to have made matters worse.

There is little sense of crisis. There is less consensus about solutions.

In contrast with 1975, the credit markets haven't closed to the city, although Mayor David N. Dinkins would rather avoid unnecessary borrowing because the city is being charged junk bond rates (and rising rates could portend worse market jitters).

The current fiscal year's deficit, if it doesn't grow, is generally regarded as manageable with a cohesive program to slash purchases, tap reserves, speed payments due from Albany, engage in gimmickry that fiscal monitors agree to wink at, cajole the City Comptroller into cooperating and coax municipal unions into making modest concessions.

"You'd have to take the scenario pretty far down the road to get to where we were then," says Ira M. Millstein, a lawyer who was advising Mayor Abraham D. Beame in 1975. "That was a crisis. This is just a mess."

But how will officials come to grips with projected deficits in the state's fiscal year, which began three weeks ago, and in the fiscal year the city starts 10 weeks from today? The city's budget gap has been made worse by Albany's; both are driven by the recession. Gov. Mario M. Cuomo has been further hobbled by his reluctance to be perceived as usurping the authority of the city's first black Mayor.

Would Mr. Cuomo even want to? No, because he has enough trouble with the state's finances without being held directly responsible for the city's. Yes, because the resurgence of the Financial Control Board, over which he presides and on which the Mayor sits, might buy fiscal flexibility and a reprieve for the Governor, for Mr. Dinkins and for many of his constituents, who might otherwise lose their city jobs, be deprived of city services and be taxed heavier. Hence ambivalence, although the Governor would rather be perceived as a victim of circumstance than a co-conspirator.

"Politically," says Felix G. Rohatyn, chairman of the Municipal Assistance Corporation, "no governor is eager to intrude on the city unless he has absolutely no choice or is absolutely certain of success. Neither condition prevails at this point."

Meanwhile a window of opportunity is slipping shut. Mr. Zuccotti, now a real-estate development executive, says the Mayor "quite frankly could do more."

"There's no question that the criticism about leadership is valid," he says. "I'm not saying what he had to do is easy. But it's a plus in the sense that if he does step up to the plate, he could do a lot."

Mr. Rohatyn says he doesn't regret having voting for Mr. Dinkins. But he says that what he terms the city administration's "policy schizophrenia" and "inept" labor negotiations -- compounded by the state's deficit -- have contributed to "creeping paralysis" rather than to boldness. "Political leaders need a clear, simple crisis symbol," he said, adding that, unlike 1975, "they do not have it today."

They may, if the financial mess is allowed to fester. Then the debate may shift to whether some temporary return of the control board would confer a strategic opportunity, an excuse to avoid tough choices or a stigma to be avoided at all cost.